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Business Observer Monday, Jun. 6, 2022 3 months ago

Pair of lawsuits challenge new insurance crises and condo safety regulations

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Industry group and contractors are asking judges to grant injunctions and stop two laws passed during last month's special session.
by: Louis Llovio Commercial Real Estate Editor

Two contractors and an industry group are suing Florida officials to stop new regulations approved during May’s special session to address the state’s property insurance market and condominium safety.

The Restoration Association of Florida, Florida Premier Roofing and Air Quality Assessors filed the lawsuits within two days of each other in Leon County Circuit Court and are each asking the court to grant injunctions to stop the laws from going into effect.

Orlando-based Florida Premier filed its lawsuit, which is aimed at provisions in a new state law aimed at improving condominium safety after the collapse of the Champlain Towers South in Surfside last year, on June 2. Winter Park-based Air Quality filed its suit, aimed at new property insurance measures to address issues in the state’s crippled insurance market, May 31.

Restoration Association, an industry group for independent contractors specializing in water, fire and mold restoration, is the second plaintiff in each lawsuit. The same Boca Raton law firm, Shapiro Blasi, Wasserman & Hermann, is represents plaintiffs in both lawsuits.

In nearly identical language, each lawsuit says the just-passed legislation is unconstitutional and that “noncompliance with its requirements should not be a basis to discipline” contractors. Each looks to get “preliminary and permanent injunctive relief.”  

Both laws passed with wide bipartisan support and were signed into law by Gov. Ron DeSantis almost immediately. The defendants named in the suits are Melanie Griffin, secretary of the Florida Department of Business and Professional Regulation and Donald Shaw, executive director of the Construction Industry Licensing Board. James Schock, chairman of the Florida Building Commission, is also named in the Florida Premier suit against the condo safety regulations.  

Neither Griffin, Shaw nor Schock responded to a request for comment.

 

Property insurance

In the first lawsuit, the Air Quality and the Restoration Association argues the new law unconstitutionally prevents contractors holding an assignment of benefits from collecting attorney fees when they win a lawsuit against an insurance company. Homeowners and policy holders can still collect the fees.

Before the change in the law, contractors could recover their attorney fees when beating insurance companies in lawsuits, known as “prevailing party fees.”

Stripping away the ability to collect the fees, the lawsuits says, “makes it economically unfeasible for the contractor to pursue its lawful rights and remedies in court.” The lawsuit argues that the amount charged for work under an assignment of benefits — capped at $3,000 in an emergency — is so low lawyers won’t agree to represent contractors on a contingency basis and that it doesn’t make economic sense for contractors to pay a lawyer hourly.

Rather than address “factors within the property insurance industry that has led to problematic volatility” the Florida Legislature instead “chose to violate the constitutional rights of contractors,” the lawsuit contends.

“To permit (the new law) to remain the law in this state unduly burdens the rights of the backbone of Florida — the contractors that repair homes after problems occur, and certainly after disaster strikes,” the lawsuit says.

“The law should be declared unconstitutional, void and of no effect.”

The arguments made in the lawsuit are similar to positions taken by the Florida Justice Association, the lobbying group for trial lawyers. Like the contractors, the lawyers’ organization argues, under the umbrella of protecting consumers, that Florida’s existing fee system should remain in place.

This despite the arguments from lawmakers at nearly every level, industry groups, business owners and consumers who blame the cost of litigation for bringing the state’s insurance system to the brink of real collapse with skyrocketing rates and fewer and fewer insurance companies are writing policies in the state.

An oft-cited statistic is that Florida accounts for 79% of the entire country’s insurance lawsuits over claims while making up only 9% of actual insurance claims. The Florida Association of Insurance Agents says that between 2013 and 2020 insurance carriers in Florida paid out $15 billion in claims costs. Of that, only 8% was paid to consumers. Attorneys got 71%.

The law the contractors are now looking to block with the lawsuit was designed to fix those issues.

 The legislation approved during the special session of the Florida Legislature the last week of May, “enacts pro-consumer measures to help alleviate rising insurance costs, increases insurance claim transparency and cracks down on frivolous lawsuits which drive up costs for all Floridians,” according to Gov. Ron DeSantis’ office.

Among the provisions included in the package were measures creating a new standard for the application of attorney fee multipliers and limiting the assignment of attorney’s fees in property insurance cases. Those were designed to help cut down on frivolous lawsuits.

The package also provided $2 billion for reinsurance relief through the Reinsurance to Assist Policy program, $150 million for homeowners to get grants for hurricane retrofitting and requires insurance companies to give a “reasonable” explanation on why a claim was denied.

 

Condo safety

The second lawsuit takes aim at the second piece of legislation to emerge from the late May special session.

This legislative package, approved by the House and Senate unanimously, mandates inspections of buildings higher than three stories and installs stopgaps to prevent condo associations from having capital shortfalls to address needs.

The new law set milestones for the inspections and rules on how do deal with structural damage when found as well creating a system to assure associations can pay for repairs and needed maintenance.

The lawsuit, though, focuses only on a subsection of the new law which relates to rules on roofing. Despite this, Florida Premier and the Restoration Association both want the entire law scrapped. It tells the court, in language identical to the other lawsuit, that “The law should be declared unconstitutional, void and of no effect.”

The issue, the lawsuit alleges, is a subsection in conflict with the existing law. The new law calls for insurers to repair roofing systems when the current law calls for the roof to be replaced under the current matching statue.

Under the matching statute, insurance companies must use materials matching the current roof’s quality, color or size. When this can’t be done, the law “mandates insurers to make reasonable repairs or replacement of items in adjoining areas so that the uniformity of a roof remains intact,” the lawsuit says. Because matching roof materials can be difficult, and may lead to uneven results, many homeowners chose to replace a roof after significant storms.

The new regulations, the lawsuit argues, allows insurance companies to choose to fix roofs without having to adhere to the matching statute — or pay contractors.

“The irreconcilable nature of this statutory conflict constitutes a due process violation under the Florida Constitution by seeming to impose a duty on a contractor to replace the roof but may allow insurer to deny the ensuing legitimate claim.” the lawsuit says.

The two lawsuits, which are unlikely the last to challenge the new laws, have been assigned to Circuit Court Judges Angela Dempsey and J. Layne Smith. No hearing dates have been set for either case.

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